China market to remain stagnant for 2 years, Morningstar predicts
Investment research firm Morningstar expects China's auto market will remain stagnant for the next two years before resuming growth.
In a new report on European automakers, Morningstar predicted new-vehicle sales in China will fall this year and again in 2016, as a result of the country's economic turmoil and decline in equity markets.
"The deterioration in Chinese demand growth for new automobiles has been surprising this year," Morningstar analyst Richard Hilgert wrote in the report released last week.
"Ninety percent of China new-automobile consumers pay in cash, and the loss of wealth effect from the rout in China's stock market has reduced or wiped out some consumers' funding for new-vehicle purchases."
The report presents one of the more pessimistic forecasts offered publicly since Chinese auto sales began slumping earlier this summer. On Thursday, the German association of the automotive industry, known as VDA, said it believes Chinese car sales will rise 4 percent in 2015.
Auto sales in China rose steadily in the first half of 2015, but fell 7 percent in July amid signs of a slowdown in the country's economy.
Morningstar now expects passenger-car sales in China to be flat to down 3 percent this year. The firm previously had expected a 7 percent sales increase in 2015.
Morningstar sees a similar trend in 2016, with sales ranging from flat to down 3 percent.
"We think year-over-year comparisons will get worse before they get better, and we maintain a negative outlook for China auto demand through the first six months of 2016," Hilgert wrote. "In our opinion, the second half of next year will show positive year-over-year improvement as comparisons become easier and household consumption rebounds."
In 2017, Morningstar sees Chinese auto sales rising 3 percent, with stronger increases resuming in 2018.
The firm noted it views the slowdown as "more a speed bump than a meltdown" and continues to see medium and long-term growth in the Chinese market.
"The deterioration in Chinese demand growth for new automobiles has been surprising this year," Morningstar analyst Richard Hilgert wrote in the report released last week.
"Ninety percent of China new-automobile consumers pay in cash, and the loss of wealth effect from the rout in China's stock market has reduced or wiped out some consumers' funding for new-vehicle purchases."
The report presents one of the more pessimistic forecasts offered publicly since Chinese auto sales began slumping earlier this summer. On Thursday, the German association of the automotive industry, known as VDA, said it believes Chinese car sales will rise 4 percent in 2015.
Auto sales in China rose steadily in the first half of 2015, but fell 7 percent in July amid signs of a slowdown in the country's economy.
Morningstar now expects passenger-car sales in China to be flat to down 3 percent this year. The firm previously had expected a 7 percent sales increase in 2015.
Morningstar sees a similar trend in 2016, with sales ranging from flat to down 3 percent.
"We think year-over-year comparisons will get worse before they get better, and we maintain a negative outlook for China auto demand through the first six months of 2016," Hilgert wrote. "In our opinion, the second half of next year will show positive year-over-year improvement as comparisons become easier and household consumption rebounds."
In 2017, Morningstar sees Chinese auto sales rising 3 percent, with stronger increases resuming in 2018.
The firm noted it views the slowdown as "more a speed bump than a meltdown" and continues to see medium and long-term growth in the Chinese market.
